A document detailing the report of a fact-finding adhoc committee of the National Council on Privatization (NPC) indicates how the Yola Electricity Distribution Company, one of the 11 distribution companies (DisCos) carved out of the now defunct PHCN, which serves the Nigerian northeast, exploited a loophole in the agreement to subvert the privatisation process.
BusinessDay gathered that the DisCo bought by Integrated Energy Distribution and Marketing Company Limited (IEDM) for US$59m, exploited the loophole to declare a “Political Force Majeure” and is asking to be refunded the $59m initial investment plus interests totalling $80.68 million.
According to the Committee’s report made available to BusinessDay by a source in the Presidency, “the transaction utterly shows how public interest can be subverted by even a single, standard and apparently innocuous contractual clause as a result of wilfully corrupt or careless political decision and/ or legal drafting.”
The IEDM had emerged a lone successful bidder for the Yola Disco against the backdrop of the raging Boko Haram revolt in the northeast, which the company was fully aware of at the time of purchase.
BusinessDay gathered however that the Company signed the agreement for the purchase with the Bureau of Public Enterprises (BPE) on the 21st of August, 2013 and after taking control of the Yola DisCo on 1st November 2013, just 10 days later, the IEDM invoked the “Political Force Majeure” provision in the Performance Agreement (PA).
This is despite being privileged to the declaration of State of Emergency by former President Goodluck Jonathan in the three north Eastern state of Adamawa, Borno and Yobe states on the 14th of May, 2013, about three months before the agreement was signed and six months before the eventual takeover of the Yola DisCo.
BusinessDay also gathered that this was accepted by the National Council on Privatisation 15 months later on 16th April 2015.
“What followed was a feverish rush for approval and payment of US$185m reparation to the IEDM, but the BPE failed to pull off the latter before the end of Jonathan’s Government. Four days after the APC took federal power, the IEDM rapidly ceded the Yola Disco to state control on Monday, 1st June 2015,” the adhoc committee said in its report.
“The NCP recently approved that the US$59m bank loan that the IEDM took to buy Yola Disco, plus the exact or proven interest on the principal, as well as other costs, be refunded totalling US$80.68m as against the $185m earlier approved by H.E President Jonathan.”
The report noted that “it might look like a good deal, but we feel duty-bound to note that both decisions are, with respect, manifestly flawed; and so should be clinically reviewed in the public interest, this is despite the fact the BPE was said to have “failed to avail the Council vital information necessary for informed and fair decision.”
“The Yola Disco debacle raises several fundamental issues not only about the transaction itself, but more importantly also about the process and ethics of public decision-making and the energy security and economic future of our country. We believe that any attempt to evade the problem, or sweep it under the carpet by paying off IEDM just so as to move on, would inexorably provoke more problems than it solves.”
“ It is our humble submission that IEDM’s activation of political force majeure is absolutely without justification in actuality and in contract. When the company submitted its bid for, and/ or signed the contract with the BPE to purchase 60% of, the Yola Disco, it knew perfectly well that the Boko Haram revolt in the Nigerian northeast
was a fact.
“It did not require any due diligence to know this, or to predict what was already a fact, and the IEDM certainly could have avoided the bid for, and/ or purchase of, the Yola Disco when it did both. So it is rather disingenuous or clever by half for the IEDM to declare a force majeure a mere 10 days after taking over the company.
“Having wrongfully declared a force majeure and then ceded the Yola Disco to the BPE, the IEDM, in effect, defaulted on its obligations under their Agreement.
“That the then NCP wrongfully concurred with the “Political Force Majeure” and even agreed to pay off the IEDM, do not in and by themselves validate or alter the material fact of the breach itself.
Hence, IEDM’s claim for reparation lacks merit and must thus fail.
“ It just should not be possible in any future privatisation for anyone to pick up public asset cheaply, get what in effect is free lifetime insurance policy ― which is what the force majeure provision really is ― add little or no value to the asset, make some decent cash along the way, then walk away in few months or whenever it takes their fancy, and still have their original investment plus all transaction costs and bank interest charges refunded,” the committee insisted in its report.
